Dental NewsArticle detail

Article details for

Dentists fear 'damaging' tax hikes

Rising costs fears over potentially damaging tax hikes are denting the confidence of small dental businesses.

That's according to the latest Economy Watch survey from the Forum of Private Business.

With the ‘emergency' Budget next week, The Forum is warning that the struggling small business sector – widely regarded as the catalyst for economic recovery and growth – must not suffer unduly as a result of the difficult steps necessary to re-balance the economy.

In all, 37% of business owners surveyed in May 2010 said the cost of doing business – excluding tax – has increased. Almost a quarter (24%) said the tax burden has increased and 28% believe that existing levels of taxation are too high.

According to the monthly report, confidence has been dented by fears that tax increases in the Budget could hit small businesses hard.

The coalition Government is expected to reveal a raft of tax measures aimed at reducing the UK's huge deficit, alongside significant public spending cuts.

They include possible changes to capital gains tax and an increase in VAT, a rise in employers' national insurance contributions for some staff – although the 1% increase originally planned has been partially scrapped – and changes to corporation tax.

Despite a mooted cut in the higher rate of corporation tax there has been no indication of a reduction in the lower rate paid by small firms.

'All eyes are on the 22 June budget for the kind of policies needed to help small businesses grow,' said the Forum's Head of Policy Matt Goodman.

'We know that public spending will be cut to help get the deficit down, but there will be knock on effects to public sector contract opportunities and business support measures, so it is important that the coalition government gets it right – particularly in the area of tax.

'Running a business and controlling costs can be difficult. The Government's emphasis must be on helping entrepreneurs to run their businesses more effectively, and fostering confidence as well as re-balancing the economy.'

Other economic indicators revealed by the survey include:• Orders have fallen for 21% of the businesses surveyed, turnover is down for 28% and profitability – including the impact of rising costs – for 37%

• May's figures show little change in the availability of finance, with 75% of firms reporting no change compared to April. Just 3% said access to finance has improved – the same as the previous month – but a similar number (4%) reported a deterioration, compared to 13% in April.Despite being profitable, some businesses have been denied overdrafts. Others have had their overdrafts reduced. In all, 49% of business owners with existing external finance arrangements are confident that they will be able to access working capital and 45% that they can access growth finance.

• Access to finance is increasingly tied to the cost of finance. A number of businesses view increasing bank charges and fees as factors excluding them from accessing external finance.With the Bank of England interest rate still at 0.5%, the latest Economy Watch data shows average rates on overdrafts at 5.8% in May, consistent with recent months, compared to the 6.5% recorded in the Forum's ‘Economic Downturn' panel in September 2009.The cost of secured loans remains at 4.4% and, at 11.8%, is significantly higher for unsecured lending. In September 2009 the average rate for both types of lending combined was 6.8%.In April slightly more respondents (85%) deemed finance to be ‘affordable' or ‘very affordable', compared to 78% the previous month. In both March and April just 10% said finance was ‘unaffordable' or ‘very unaffordable'.The affordability question was not asked in May because the results have been fairly consistent but, according to some members surveyed, there been slight increases in the cost of overdrafts and loans. Others reported increasing charges and banking fees.

• Almost one in five (18%) firms experienced increases in late payments in May, but the levels of outstanding payment is decelerating. In addition, 20% reported that ‘other cash flow difficulties' are rising.

• Priorities include increasing sales and turnover (47%), being able to operate in a stable business environment (35%) and reducing costs (17%).

Other factors entrepreneurs believe would help their businesses grow include improved business and consumer confidence (29%) – particularly given the uncertainty surrounding the imminent budget – stabilising the economy (20%), internal business development (18%) and specific industry incentives (11%).

Business supportSimilar to recent months, 16% of respondents anticipate needing support while 69% intend to be self-sufficient and 15% are uncertain – indicating the importance of a stable business environment.

Few business owners detailed the precise nature of the support they require, but of those that did 67% called for help with training, the same number with recruitment, 50% need finance for training, the same percentage require working capital, 50% assistance with legal compliance and 38% want support on meeting tax requirements.

Business investmentIn all, 28% have no plans to invest in their businesses in the coming month, 21% intend to invest in sales and marketing, 27% in training, 21% in machinery and equipment, 17% anticipate investing in upgrading property and the same number in product and process development.

Employment and skills trainingTotal employee numbers have dropped by 4% over the past year and around 8% of businesses have reduced their working hours. Some of these changes relate to agency staff or contractors but many have been full-time staff.

Respondents' vacancies have dropped since April. However, so have the number of redundancies. Many small businesses appear to be reluctant to take on new staff until after the Budget.

Almost a third (32%) of the small businesses surveyed believe they are operating with a skills gap.

In all, 29% of respondents believe there is a shortage of employees with specialist skills, 24% identify a lack of generic technical or vocational skills and 19% of businesses perceive that there is a shortage of sales skills.

Further, 14% believe there to be a dearth of ‘employment attributes', 12% customer service skills and 10% that there is a lack of administrative skills.